Table 11-13 Arc Digital Starts the Year with Balances in Its Estimated

question 51

Multiple Choice

Table 11-13
Arc Digital starts the year with balances in its Estimated warranty payable account and Warranty expense account as shown below. During the year, there were $190,000 of sales and $3,200 of warranty repair payments. Arc Digital estimates warranty expense at 1.5% of sales.
-Refer to Table 11-13. At the end of the year, what was the balance in the warranty expense account?

• A)$2,850 debit
• B)$1,250 credit
• C)$3,200 debit
• D)$1,420 debit

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Definitions:

Nominal Rate

The interest rate before adjustments for inflation, as opposed to the real rate, which is adjusted for inflation.

Rate of Inflation

The percent change in the price level of goods and services in an economy over a period of time, usually measured annually.

Interest

Interest is the charge for borrowing money typically expressed as an annual percentage rate, or the income earned from lending money.

Consumption

Families or individuals partaking in the use of goods and services.